OMAHA, Neb. (AP) -- Second-quarter profits at Warren Buffett's Berkshire Hathaway Inc. fell 9 percent because of bigger paper losses on derivatives the company sold, but many of its subsidiaries performed well.

The company reported that profits were up in Berkshire's insurance units. And business improved at the conglomerate's utility, railroad, manufacturing and retail businesses.

"It was obviously a solid rebound in insurance, but what was really terrific was the non-insurance subsidiaries," said David Rolfe, chief investment officer at Wedgewood Partners, which invests in Berkshire.

The Burlington Northern Santa Fe railroad added $802 million to Berkshire's net income this year, up from $690 million a year ago. Revenue at the railroad grew about 6 percent thanks to fuel surcharges and a 2 percent increase in total shipping volume. More shipments of consumer goods and industrial products offset weak coal demand.

The addition of specialty chemical maker Lubrizol, which Berkshire acquired last September, also helped profits. Lubrizol added $322 million to Berkshire's pretax profits in the quarter. That helped Berkshire's manufacturing, service and retail unit generate just over $1 billion net income, up from $789 million last year.

Berkshire also said its housing-related business - which include Shaw carpet, Acme Brick, numerous real estate brokerages and the Nebraska Furniture Mart - all showed improvement in the second quarter.

Jeff Matthews, an investor who wrote "Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett," said Berkshire recorded a good quarter overall with no big surprises.

Matthews said even though Berkshire's housing-related businesses improved, many of its other manufacturing and retail units reported weaker demand. That raises concerns about the strength of the overall economy.

Berkshire officials do not typically comment on quarterly earnings reports, and they did not immediately respond to a message Friday afternoon.

The lack of major catastrophes in the world this year helped Berkshire's insurance companies, which include Geico and several reinsurance firms, improve significantly. Last year, Berkshire's insurance companies incurred $1.2 billion in catastrophe losses related to the earthquakes in Japan and New Zealand and other weather losses in the U.S. and Australia.

Berkshire said it generated $3.1 billion net income, or $1.25 per Class B share. That's down from last year's second quarter net income of $3.4 billion, or $1.38 per Class B share. And last year's quarter was helped by a one-time $1.25 billion gain.

The results topped the $1.19 per share Wall Street was expecting, according to a FactSet survey.

Buffett has said it's better to look at Berkshire earnings without the derivative losses and investment gains. He says Berkshire's investment and derivative gains or losses can be misleading because the company rarely sells its investments.

Berkshire reported a 37 percent increase in its operating profit. Berkshire reported $3.7 billion in operating earnings, or $1.50 per Class B share. That's up from $2.7 billion, or $1.09 per Class B share, last year.

Berkshire recorded a $693 million loss on its derivative contracts in this year's second quarter. That's up from a $120 million loss last year.

The true value of the derivatives won't be clear for at least several years because they don't mature until nearly a decade from now. But Berkshire is required to estimate their value every time the company reports earnings.

Buffett has told investors he believes the contracts - some of which are tied to equity markets and some of which are tied to credit defaults - will ultimately be profitable because the premiums are being invested.

Andy Kilpatrick, the stockbroker-author who wrote "Of Permanent Value: The Story of Warren Buffett," said the results are impressive because during the second quarter Europe's debt woes increased and the overall economy slowed.

"I thought it was a good decent quarter in a bad world," Kilpatrick said.

Berkshire owns roughly 80 subsidiaries, including clothing, furniture and jewelry firms. Its insurance and utility businesses typically account for more than half of the company's net income. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

The quarterly results were issued after the stock market's close Friday. Berkshire's Class B shares rose more than 1 percent in after-hours trading Friday before giving up some ground to trade up 57 cents at $86.15.